Archive for March, 2010

It seems like everywhere you turn these days, there are laments about the failure of our organizations. Government institutions, schools, banks, multi-national corporations, poverty relief/social service organizations, NGO’s, chose a sector and you’ll find widespread bemoaning.

The common cry – there is no humanity in how we operate. The angst is so wide spread that we even have a reality tv show focused on this issue: Undercover Boss The show highlights how Corporate Social Responsibility has become THE way to manifest the soul of a corporation. http://www.alliancemagazine.org/en/content/us-companies-embrace-csr-soul-corporation In the show, CEO’s disguise themselves as ordinary employees in order to get an accurate understanding of how the company operates and is perceived. Each CEO featured has had a life transforming experience which leads to…

The solution – it must be a leadership problem so let us focus on the leaders! Leaders mold an organization; they inspire others; they set the tone; they lead by example. Typically this leadership role is relegated to managers, executive staff and the Board of Directors. If an organization is failing, it is entirely their fault.

However, this always leaves me to ask myself, what about the rank and file? In the case of corporations, it would be everyone down to the cleaning staff. In the case of government it is the average citizen. If all our problems are because of our leaders/lack of, what are WE/US/I responsible for? What can we do to make change in our daily lives or to improve things so they are the way we want them to be?

This is the problem with leadership blaming. It makes one a helpless victim of circumstance which in turn fosters frustration, resentment, anger, and outrage.

What if, instead of examining leaders, we take a close look at the institutions we have created? Not just a current look, but an historical look as well.

Let us start with the notion of a corporation. Here I am not restricting myself to a profit-making business entity. Corporation is a legal definition. Just so we’re all on the same page, here is the definition:

A legal entity, created under the authority of a statute, which permits a group of people, as shareholders [added i.e. owners whose percent ownership is apportioned in shares], to apply to the government for an independent organization to be created, which then pursues set objectives, and is empowered with legal rights usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money. Source: http://duhaime.org/LegalDictionary/C/Corporation.aspx

So now we see that regardless of one’s beliefs around profit-making companies versus non-profit companies, the legal entity under which they operate is essentially the same: a corporation.

How doe s this have any bearing on our current problems? We lament that corporations have no souls. We forget: THAT IS WHAT THEY WERE DESIGNED TO BE – SOULLESS ENTITIES!

Don’t believe me? Let’s take an historical walk…

Take a look under “Corporate Personality” relating to the Wikipedia reference for corporate legal history http://en.wikipedia.org/wiki/United_Kingdom_company_law I’m using English law because it is the system from which U.S. law evolved. The most famous citation you will find is that of Sutton Hospital in 1612 (emphasis added):

“And it is great reason that a Hospital in expectancy or intendment, or nomination, shall be sufficient to support the name of an Incorporation, when the Corporation itself is onely in abstracto, and resteth onely in intendment and consideration of the Law; for a Corporation aggregate of many is invisible, immortal, & resteth only in intendment and consideration of the Law; and therefore in 39 H. 6. 13b. 14 a. Dean and Chapter cannot have predecessor nor successor. 21 E. 4. 27. & 30 E. 3. 15. 6. They may not commit treason, nor be outlawed, nor excommunicate, for they have no souls, neither can they appear in person, but by Attorney33 H. 8. Br. Fealty. A Corporation aggregate of many cannot do fealty, for an invisible body cannot be in person, nor can swear, Plow. Com. 213, and The Lord Berkley’s Case 245, it is not subject to imbecilities, or death of the natural, body, and divers other cases.”

Ok, so that was in 1612 and this is 2010. Surely our legal interpretation has evolved since then. Well, it’s not 2010 but here is a citation from 1974 (emphasis added):

“Mr. Price argued that, in effect, there are two separate sets of persons in whom authority to activate the company itself resides. Quoting the well known passages from Viscount Haldane L.C. in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] A.C. 705, he submitted that the company as such was only a juristic figment of the imagination, lacking both a body to be kicked and a soul to be damned.

So, if it is clear we have designed the legal entities under which we organize to have no souls, why is it that we then blame the leaders of our corporations?

Let’s go back on our historical walk. This time to 1915 (emphasis added):

“My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.“

Bolton v Graham & Sons Limited, per Lord Denning,

“A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre… (the) directors and managers represent the directing mind and will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.”

You can see how the U.K. history transfered to the U.S. history in this Wikipedia reference under Definition where you’ll find reference to the above mentioned 1974 case http://en.wikipedia.org/wiki/Corporate_law

See the problem? We design organizations to have no souls. We fill these organizations with humans. As law-abiding citizens, these humans, especially those charged as directors and managers, must follow the corporations laws. These laws are designed to keep the organization soul less and yet, we then blame the directors and managers for acting this way.

Don’t believe me? If your organization has ever been faced with a questionable or moral/ethical situation for which there is little or no precedent, as a director or manager, you call your attorney. What will your attorney tell you to hold as your first responsibility? Protect the organization/corporation. Not protect your humanity, not protect those who might be affected by your actions, nope, you must first protect this soulless entity which you are contractually obligated to operate in a responsible manner.

This reference highlights that the duties of the Director of any corporation “are owed to the company itself, and not to any other entity” http://en.wikipedia.org/wiki/Directors’_duties In other words, the duties are not owed to society, to the neighborhood, etc. they are owed strictly to the soulless entity. The Directors (aka Board of Directors, set the tone for the entire organization). Lawyers are always warning both directors and officers of the extreme personal liability and risk one invites if one “pierces the corporate veil” http://en.wikipedia.org/wiki/Piercing_the_corporate_veil While this reference seems simple and short enough, when the lawyers come in and talk, one is left with quite the deer in headlights look and paralyzed by the fear that something as simple as shaking someone’s hand could “pierce the corporate veil” or bring in unnecessary liability. Why, because there is always someone, somewhere who as sued a similar organization for the most obscure issue known to mankind!

We then wonder why otherwise kind and nice people act like schizophrenic despots when they become mangers or directors. Instead of asking ourselves, “why do they do this?” shouldn’t we ask ourselves, “how can they not given the confines within which they must operate?”

Taken from this perspective, it is actually a testament to the human spirit that we have corporate ethics and responsibility at any level whatsoever! The herculean task of making a soulless entity behave as if it does have a soul has quite the Sisyphus ring to it.

Yes, we have made some strides but would it not be much easier to organize ourselves (both in terms of legal parameters and our activities) in a manner that puts the soul first?

Our current corporate legal history dates back to Roman times http://en.wikipedia.org/wiki/History_of_corporate_law . What we did before this I have not been able to determine. What is interesting to note is that sometime during the Roman era, while we do not know by whom or why, it was decided that this was the best way to proceed and we have been replicating and expanding the system ever since. Is it then not possible to create, replicate and expand a new system?

I am not a legal expert and therefore cannot begin to ascertain how this can be done while still upholding the centuries of legal precedent (rights & obligations) we have created around entities which have no souls. I would however, love for this blog to be the starting point for such a debate…

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April 29, 2010 Add On

There has been much recent debate over the Supreme Court’s decision to allow Corporations to lobby Congress (Citizen’s United v Federal Election Commission).

Many believe that corporations are ” suddenly” being treated as people when there is a long legislative history of corporations being treated as individual beings (not necessarily human beings). A summary of such concerns can be found in this Huffington Post article

However, as was the case with Enron and now with Goldman Sachs, the legislative history of treating corporations as individual beings also means that the infamous soulless corporation can be brought up on criminal charges just like a regular person can.

Such prosecutions can destroy a corporation as summarized by this Washington Post article.

“…[I]n terms of that Supreme Court decision, if corporations are going to be just like people, let me tell you my criminologist hat. Then let’s use the three strike laws against them. Three strike laws, you go to prison for life, if you have three felonies. How many of these major corporations would still be allowed to exist, if we were to use the three strike laws, given what they’ve been convicted of in the past?

And in most states, they remove your civil rights when you’re convicted of a felony. Well, let’s take away their right to make political contributions that they’re found guilty of a violation.”

Evidence shows that Corporations do act like people. If others are watching and pointing out their flaws/mistakes, they tend to self-regulate. Here is some research from Harvard Business School.

Consumer demand/expectations are part of the equation but so is government oversight and transparency (a lot of which is brought to light through the media).

In the current climate what has become clear is that consumers are demanding, media is reporting, however, government has not been scrutinizing.

Hence, perhaps one possible solution to making Corporations more accountable and socially responsible might be, instead of creating a new legal structure, simply enforce the laws we already have in place.

The report highlights negative effects the Green Revolution has had as well as discusses solutions/ways to avoid these mistakes moving forward. A strong case is made for what they call agroecology (organic farming methods in common parlance).

It is the first report I’ve seen which takes into account geographic, climate & cultural differences between sub-Saharan Africa and Asian countries. The authors advocate for systems which allow farmers to share their knowledge & expertise amongst themselves instead of extension/”expert” based systems which tell farmers what to do. However, agricultural researchers are still needed to formalize the knowledge which farmers share/create. ICT is viewed as essential to making this happen, esp. to enable farmers to overcome institutional barriers (e.g. establishing information sharing networks, reducing the cost of searching for/acquiring information, linking farmers to markets & credit).

There is also a very interesting panel discussion which focuses on US/USAID policy in facilitating transition to market driven approaches to agriculture:

Commentary (not mentioned in discussion but reflective of general sentiment) on impact privatization is having on land ownership http://www.africafiles.org/article.asp?ID=23003 (based on a brief mention in John Lamb’s talk, the World Bank appears to be working to address these concerns by establishing investment standards )